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14 83883537 5 CIR Vs Hon Raul M Gonzalez
14 83883537 5 CIR Vs Hon Raul M Gonzalez
GONZALEZ,
G.R. No. 177279 October 13, 2010
FACTS:
• Pursuant to Letter of Authority (LA) dated August 25, 2000, conducted a
fraud investigation for all internal revenue taxes to ascertain/determine the tax
liabilities of respondent L. M. Camus Engineering Corporation (LMCEC) for
the taxable years 1997, 1998 and 1999.
• The audit and investigation against LMCEC was precipitated by the
information provided by an "informer" that LMCEC had substantial
underdeclared income for the said period.
• For failure to comply with the subpoena duces tecum issued in connection
with the tax fraud investigation,
• a criminal complaint was instituted by the Bureau of Internal
Revenue (BIR) against LMCEC on January 19, 2001 for violation of Section
266 of the NIRC
• Based on data obtained from an "informer" and various clients of LMCEC, it was
discovered that LMCEC filed fraudulent tax returns with substantial
underdeclarations of taxable income for the years 1997, 1998 and 1999.
• Petitioner thus assessed the company of total deficiency taxes amounting to
P430,958,005.90 (income tax - P318,606,380.19 and value-added tax [VAT] -
P112,351,625.71) covering the said period.
• The Preliminary Assessment Notice (PAN) was received by LMCEC on
February 22, 2001.
• In view of the above findings, assessment notices together with a formal
letter of demand dated August 7, 2002 were sent to LMCEC through
personal service on October 1, 2002.
• Since the company and its representatives refused to receive the said
notices and demand letter, the revenue officers resorted to constructive
service in accordance with Section 3, Revenue Regulations (RR) No. 12-9911.
• On May 21, 2003, petitioner, referred to the Secretary of Justice for
preliminary investigation its complaint against LMCEC, Luis M. Camus and Lino
D. Mendoza, the latter two were sued in their capacities as President and
Comptroller, respectively.
• The case was docketed as I.S. No. 2003-774. In the Joint Affidavit executed by the
revenue officers who conducted the tax fraud investigation,
• it was alleged that despite the receipt of the final assessment notice and
formal demand letter on October 1, 2002, LMCEC failed and refused to pay
the deficiency tax assessment in the total amount of P630,164,631.61,
inclusive of increments, which had become final and executory as a
result of the said taxpayer’s failure to file a protest thereon within
the thirty (30)-day reglementary period.
• Camus and Mendoza filed a Joint Counter-Affidavit contending that LMCEC
cannot be held liable whatsoever for the alleged tax deficiency which had
become due and demandable. Considering that the complaint and its annexes all
showed that the suit is a simple civil action for collection and not a tax
evasion case,
• LMCEC further averred that it had availed of the Bureau’s Tax Amnesty
Programs (Economic Recovery Assistance Payment [ERAP] Program and
the Voluntary Assessment Program [VAP]) for 1998 and 1999; for
1997, its tax liability was terminated and closed under Letter of
Termination
• LMCEC argued that petitioner is now estopped from further taking any
action against it and its corporate officers concerning the taxable years 1997
to 1999. With the grant of immunity from audit from the company’s
availment of ERAP and VAP, which have a feature of a tax amnesty,
the element of fraud is negated
• LMCEC further asserted that it filed on April 20, 2001 a protest on the
PAN issued by petitioner for having no basis in fact and law. However, until
now the said protest remains unresolved.
• In the Joint Reply-Affidavit executed by the Bureau’s revenue officers, petitioner
disagreed with the contention of LMCEC that the complaint filed is not
criminal in nature, pointing out that LMCEC and its officers Camus and Mendoza
were being charged for the criminal offenses defined and penalized under
Sections 254 (Attempt to Evade or Defeat Tax) and 255 (Willful Failure to Pay
Tax) of the NIRC.
• In this case, the BIR decided to simultaneously pursue both remedies and thus
aside from this criminal action, the Bureau also initiated administrative
proceedings against LMCEC.
• Petitioner stressed that LMCEC already lost its right to file a protest
letter after the lapse of the thirty (30)-day reglementary period.
LMCEC’s protest-letter dated December 12, 2002 to RDO Clavelina S. Nacar,
RD No. 40, Cubao, Quezon City was actually filed only on December 16,
2002, which was disregarded by the petitioner for being filed out of time.
• Petitioner further asserted that LMCEC’s claim that it was granted
immunity from audit when it availed of the VAP and ERAP programs
is misleading. LMCEC failed to state that its availment of ERAP under
RR No. 2-99 is not a grant of absolute immunity from audit and
investigation,
• Petitioner also pointed out that LMCEC’s assertion correlating this case
with I.S. No. 00-956 is misleading because said case involves another
violation and offense due to the failure of LMCEC to submit or
present its books of accounts and other accounting records for
examination despite the issuance of subpoena duces tecum against Camus
in his capacity as President of LMCEC. The determination of probable
cause in said case is confined to the issue of whether there was already a
violation of the NIRC by Camus in not complying with the subpoena
duces tecum issued by the BIR.
ISSUE: whether LMCEC and its corporate officers may be prosecuted for
violation of Sections 254 (Attempt to Evade or Defeat Tax) and 255 (Willful
Failure to Supply Correct and Accurate Information and Pay Tax).
HELD:
We grant the petition.
• There is no dispute that prior to the filing of the complaint with the DOJ,
the report on the tax fraud investigation conducted on LMCEC disclosed
that it made substantial underdeclarations in its income tax returns for
1997, 1998 and 1999.
• Pursuant to RR No. 12-99,38 a PAN was sent to and received by LMCEC on
February 22, 2001 wherein it was notified of the proposed assessment of
deficiency taxes. In response to said PAN, LMCEC sent a letter-protest to the TFD,
which denied the same on April 12, 2001 for lack of legal and factual basis and
also for having been filed beyond the 15-day reglementary period.
• As mentioned in the PAN, the revenue officers were not given the
opportunity to examine LMCEC’s books of accounts and other accounting
records because its officers failed to comply with the subpoena duces
tecum earlier issued, to verify its alleged underdeclarations of income reported
by the Bureau’s informant under Section 282 of the NIRC. Hence, a criminal
complaint was filed by the Bureau against private respondents for
violation of Section 266
• For the crime of tax evasion in particular, compliance by the taxpayer
with such subpoena, if any had been issued, is irrelevant. As we held in
Ungab v. Cusi, Jr.,41 "[t]he crime is complete when the [taxpayer] has x
x x knowingly and willfully filed [a] fraudulent [return] with intent to
evade and defeat x x x the tax."
• In the Details of Discrepancies attached as Annex B of the PAN,42 private
respondents were already notified that inasmuch as the revenue officers were
not given the opportunity to examine LMCEC’s books of accounts,
accounting records and other documents, said revenue officers gathered
information from third parties. Such procedure is authorized under
Section 5 of the NIRC,
LMCEC -- the alleged violation of the general rule in Section 235 of the NIRC allowing
the examination and inspection of taxpayer’s books of accounts and other
accounting records only once in a taxable year –
• likewise untenable
• the discovery of substantial underdeclarations of income by LMCEC for
taxable years 1997, 1998 and 1999, as well as the necessity of obtaining
information from third parties to ascertain the correctness of the return filed or
evaluation of tax compliance in collecting taxes (as a result of the
disobedience to the summons issued by the Bureau against the private
respondents), are circumstances warranting exception from the general
rule in Section 235.